WHO WILL WIN? Boxing superstar Manny Pacquiao accuses Revenue Commissioner Kim Henares of harassing him. But Henares claims Pacquiao did not declare his US income and underdeclared his Philippines income in 2008-2009. RICHARD BALONGLONG/INQUIRER NORTHERN LUZON; ANDREW TADALAN/INQUIRER FILE PHOTO

World boxing superstar Manny Pacquiao “technically misdeclared” his income in 2009 when he stated in his tax return that he earned only less than P50 million in the Philippines and when he failed to include his earnings from his two fights in the United States that year, Revenue Commissioner Kim Henares said on Thursday.

His gross income should have been closer to or even more than P1 billion, Henares said as she defended her agency from public criticisms, especially those hurled by his camp, after it froze his bank accounts for failing to settle P2.2 billion in tax deficiencies.

The head of the Bureau of Internal Revenue (BIR) stopped short of confirming that Pacquiao, one of the world’s richest athletes, could later be held liable for tax evasion and left the door open for him if he wanted to talk about his tax problems with the agency.

Since Monday, when he returned to his hometown in General Santos City after a convincing victory over American Brandon Rios in a welterweight match in Macau, Pacquiao has protested the BIR’s move to freeze his bank accounts pending his submission of proof that he had already paid taxes from his earnings in the United States in 2009.

Pacquiao, who is also the Sarangani representative and the country’s richest lawmaker, has insisted he had given to the BIR copies of tax returns submitted to the US Internal Revenue Service (IRS) to show that he paid his income taxes. His promoter, Bob Arum of Top Rank, has supported his claim.

Reached by the Inquirer for comment in General Santos Thursday night, Pacquiao said he was not hiding or running away from his responsibility involving his taxes. He expressed confidence that the issue would be settled soon.

In a news conference at the Department of Justice, where she files tax evasion cases every two months under the RATE (Run against Tax Evaders) program of her agency, Henares said she wanted to clarify the BIR’s issue with Pacquiao, considering the “drama” and the “endless exchanges” between them.

‘Much leeway’

Contrary to what the “people’s champ” was saying that the Aquino administration was singling him out, Henares stressed that the bureau had actually given him “much leeway” in dealing with his tax woes.

On his public outbursts, Pacquiao said he was just replying to what was published and denied he started the media war. He said he would stop discussing the issue and let his lawyers and accountants do their jobs.

Henares disclosed that the BIR started to investigate and audit Pacquiao in late 2010 until early 2011 after an “abrupt” drop in his ranking among the country’s top taxpayers. From 2006 to 2008, Pacquiao was in the top 10 percent of highest taxpayers but he slid to the top 30 percent in 2009, she said.

When the BIR audited him for his 2008 and 2009 income tax returns (ITRs), Pacquiao did not submit any documents, thus prompting the agency to subpoena him. He responded by executing an affidavit declaring his US income and tax payment in his 2008 ITR but without any supporting documents.

In that instance, Henares said the BIR did not become strict in asking documentation and allowed him to claim tax deductions.

No documentation

But when Pacquiao claimed tax deductions for expenses, he was unable to provide documentation, she said. The BIR then assessed that he had P769 million in tax obligations, including value-added tax.

On his 2009 ITR, Henares said Pacquiao did not declare any US income but only less than P50 million earned in the Philippines, thus the “underdeclaration.”

The agency computed his tax obligations for 2009 at P1.433 billion based on his income in the United States from “public information” on his bouts there and shares from pay-per-view and online ticket purchases, as well as endorsements.

“Despite having not declared his US income, we still gave him the opportunity for two years to prove he paid taxes for that. Actually, it’s too late for him to make this declaration because it was not in his ITR … But out of respect for him, we asked him to give us his IRS copy,” Henares told reporters.

This copy should be original and certified, she added, noting that this has always been the practice.

Final notice

She said the BIR issued a notice of assessment of Pacquiao’s tax obligations in May this year. Because Pacquiao’s camp did not protest this, the notice became final in June.

On July 1, the BIR issued a warrant of levy and distraint to 35 entities. Pacquiao went to the Court of Tax Appeals (CTA) to seek a review of the BIR assessment and seek the lifting of the warrant.

Pacquiao’s move to go to the CTA to file a case against the BIR in August showed that he was aware of the warrant, according to Henares. She scoffed at his earlier statement questioning the timing of the issuance of the BIR warrant after his win in Macau that only showed he was being singled out.

“If you’re a celebrity, you cannot hide your income because it’s seen by the whole world,” Henares said, stressing that the law was made for everyone and should be applied to everyone.

The BIR, she said, was just doing its job in enforcing the law by collecting taxes so that the government could spend money for programs.

Asked whether his technical misdeclaration of his 2009 income made him liable for tax evasion, Henares declined to comment.

“I don’t want to talk about what would happen in the future. As far as I am concerned, we are just collecting taxes. Please pay us so we don’t have to go to the next decision point,” she said.

If Pacquiao pays his tax obligations within six months as stated by law, the BIR will lift the warrant of levy and distraint, she added.

Henares said she had not issued more warrants after the CTA came up with a “status quo ante” order. The court scheduled a hearing on Dec. 5.—With a report from Aquiles Z. Zonio, Inquirer Mindanao

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Money hungry Henares! She doesn’t even know how much money Manny actually received. She based her estimate on what she reads on the paper without verifying first how much money was really received by Pacquiao.

There is a difference between income tax filing in Philippines and in
the US. It’s mostly electronic filing or online filing when you file
your income tax with the IRS in the US. The IRS doesn’t give you a
certified copy. Your accountant or tax preparer just gives you a copy of
the income tax return that you filed (Form 1040), and you’re supposed
to keep your supporting financial documents in case you get audited by
the IRS. Perhaps, Henares can ask Manny to sign IRS Form 8821 (Tax
Information Authorization) and submit it to the IRS. That way, the IRS
can provide them directly Manny’s tax information, since the BIR won’t
take the copy of the 1040 that Manny is giving them.

I have a question and anybody with knowledge please let me know. Did KIm Henares and the BIR required the certified true copy of Manny Pacquiao IRS tax returns for the years prior to 2008? I ask this question because I am curious to know if the BIR is consistent in its claim to require certified true copy of the foreign tax returns.

Simple question, was a certified true copy of Manny’s IRS tax return required in his previous tax. Anyone with knowledge can answer even though those years are not in question. If you don’t know just say, I don’t know.